One should never preannounce the
focus of their next column, because one never knows what the next day might hold.
Last week, I wrote
about South Africa’s growing beef exports and argued that the next region that
holds potential for growth in the coming years is
the Far East markets, with the hope to further the discussion this week.

But things got more interesting in
the other areas of the South African agricultural economy.

Since December 2017, when the African
National Congress announced
its decision to speed up land reform by pursuing expropriation without
compensation, provided that it is sustainable and does not harm the
agricultural sector or the economy, I have been closely monitoring most of the high-frequency agricultural data in order to
track the investment path in the sector.

The tractor sales were up by 16%
from October 2017, with about 817 units sold, which was the highest monthly
sales figure since October 2014. This boosted South Africa’s tractor sales for
the first 10 months of this year to 5 818 units, 9% higher than the
corresponding period last year.

This is an important development
from an agricultural investment perspective, particularly if we consider that
earlier in the year there were views that farmers might reduce crop planting due to uncertainty caused by land reform,
which would have negatively affected tractor sales. In addition to the
aforementioned robust tractor sales, last month, the South African Crop
Estimate Committee provided further tentative evidence indicating
that farmers intend to increase the area plantings for summer grains and
oilseeds by 5% to 4.03 million hectares in total from the 2017/18 production
season, which again contract to the view of a possible decline in planting.

Moreover, the combine harvester
sales more than doubled the previous month’s volume and 45% higher than October
2017, with about 29 units sold. This was driven by the winter crop harvest
process currently underway in barley, wheat and canola producing regions of the
Western Cape.

A
glimpse of activity

Admittedly, the aforementioned
tractor and combine harvester sales data are not perfect indicators of general
investments in the agricultural sector,
but give a glimpse of the current
activity in the sector.

The other data point that I am also
monitoring closely, but which is not a perfect indicator of measuring
investment reaction to policy changes in the short term, is the Gross Fixed
Capital Formation.

This declined by 3% year-on-year to
R16.2bn in 2017. This decline was largely on the back of unfavourable weather
conditions in some parts of the country, which somewhat constrained investment.

Going forward, however, policy
uncertainty, if it lingers for longer, could weigh on fixed investment. In the
meantime, we look at agribusiness confidence levels as a guide of the investment path for the year.

In September 2018, the Agbiz/IDC
agribusiness confidence index fell
below the 50 neutral mark to 46 index
points, suggesting that agribusinesses are somewhat downbeat about
business conditions in the country.

The root cause of the pessimism was
the lingering uncertainty around land reform policy and weak economic growth,
among other issues.

Above all, the recent tractor and
combine harvester sales data are an encouraging barometer of the investment
path in the South African agricultural sector following a slowdown in
agribusiness confidence.

Of equal importance is that while
the recent tractor sales data paint a fairly optimistic picture about activity
in the sector, the decline in confidence is a concern as it could weigh on
fixed investment in the long run.

Wandile Sihlobois an agricultural economist and head of agribusiness research at the Agricultural Business Chamber of South Africa (Agbiz). Follow him on Twitter: @WandileSihlobo